Spain Caps Rental Rates and Extends Lease Terms

New rules for long-term residential rentals have taken effect in Spain. Tenants have gained the right to extend their contracts for another two years, while rent increases are restricted. The changes could affect almost 1.9 million agreements expiring between 2026 and 2028, according to Spain’s Official State Gazette (BOE).

New Conditions for Extending Rental Agreements

The new rules apply to long-term leases of homes used as permanent residences. The additional two years are available to tenants whose mandatory contract term or subsequent renewal period ends by December 31, 2028. The measure also covers situations in which an occupant remains in the property after an agreement expires and the owner does not ask them to leave.

In Spain, the mandatory rental period is five years when the property belongs to an individual and seven years when it is owned by a company. The new decree allows an extension of one year, followed by another year. The existing living arrangements and payment terms remain unchanged throughout that period.

To obtain an extension, tenants must apply to the owner and have no outstanding rent arrears. An important requirement is that payments must have been made on time during the previous eight months. Tourist and short-term rentals are not covered by the new rules.

Reasons for Refusing a Rental Extension

Property owners may refuse to extend a lease in certain circumstances, for example when the home is needed by the owner or a close family member. The landlord must notify the tenant in advance and provide evidence supporting the grounds for recovering the property.

An extension is not required if the parties agree on new terms or sign a different contract. In particular, the law provides for the possibility of reducing rent in Spain by at least 5%. Special provisions apply to people who already benefit from additional protections under Article 10.3 of Spain’s rental law.

Spain has also adopted another decree, No. 28/2026. It provides for longer lease terms and compensation to tenants if an owner decides to terminate an agreement. The new provisions are due to take effect on November 15, 2026, following parliamentary approval. However, lawyer Santiago Tomás de Carranza doubts that the measure will secure the necessary political support.

Increases in Residential Rental Rates

The Spanish government has established new rules for reviewing rents, which will remain in force until December 31, 2027. Landlords and tenants may agree on a revised rate, but without an agreement the increase must not exceed 2%. If the rent is already above the ceiling set by the government’s reference-price system, further increases are prohibited.

For a monthly rent of €1,000, a 2% increase amounts to €20, bringing the payment to €1,020. Indexation is permitted only at the times specified in the contract and where the agreement contains a relevant provision. These measures apply to existing leases and do not amount to a complete freeze on housing rents.

Spain also uses a special index, IRAV, calculated by the National Statistics Institute (INE). It determines permissible rent increases for particular categories of contracts depending on when they were signed. The new requirements must be applied alongside the legislation already in force.

New Rules Could Affect 5 Million Residents of Spain

Almost 1.9 million residential rental agreements in Spain qualify for extensions under the new rules. The largest number expire in 2027 — 809,899. The figure is 751,166 for 2026 and 334,611 for 2028. Altogether, the changes could affect around 5 million people, Infobae reports, citing Spain’s Ministry of Consumer Affairs.

Rental Agreements by Expiry Year

The Community of Madrid has the largest number of such agreements, at approximately 402,000. It is followed by Catalonia with 339,000, Andalusia with 263,000 and the Valencian Community with 224,000. These four regions account for about 65% of all potential extensions.

Rental Agreements by Region in Spain

In Catalonia, Barcelona accounts for the majority of potential extensions, with 248,053. In eastern Spain, the leading provinces are Valencia (120,523) and Alicante (76,705). In Andalusia, the highest figures are recorded in Málaga (74,050), Seville (54,866) and Granada (40,069). This concentration is particularly important for the property markets of major cities and popular resort destinations, where the changes affect large numbers of tenants and owners.

Spain’s Rental Market: Trends and Outlook

In September 2026, the average asking rent in Spain reached €15.1 per sq. m per month, up 5.6% from the same month in 2025. Prices nevertheless declined by 0.4% during the third quarter, according to idealista. Company representative Francisco Iñareta attributes persistently high costs to strong demand and a shortage of affordable listings.

Santiago Tomás de Carranza, managing partner of Thomás de Carranza Abogados, warns that the legislative changes are increasing uncertainty for property owners. He is particularly concerned about the provisions of the second decree, which envisage longer residential lease extensions and compensation for tenants. In his view, tighter regulation could have a negative effect on housing supply.

Analysts at International Investment also believe that the new rules may make Spain’s residential property market less attractive to investors. With purchase prices already high, restrictions on rental income worsen the balance between potential returns and risks. This could particularly weaken demand for properties bought for long-term letting, especially in Madrid and Barcelona.

Over time, declining private investment could aggravate the housing shortage and make it harder for prospective tenants to find apartments. Spanish policymakers face a potential conflict between protecting existing tenants and the need to expand housing supply.

FAQ

How long can a rental agreement be extended?

For one year, with the option to renew for another year — a maximum of two additional years.

Who is covered by the new rules?

Tenants renting their primary residence whose mandatory contract term or renewal period ends by the close of 2028.

Is the extension automatic?

No. Tenants must apply to their landlord and comply with the statutory payment requirements.

Can a landlord refuse an extension?

Yes, in circumstances defined by law, including when the owner or a close family member needs to use the home.

How much can rent be increased?

Until the end of 2027, annual increases are capped at 2% where no new agreement is reached. In some cases, indexation is prohibited.

Do the changes apply to tourist rentals?

No. The new two-year extension applies to leases for permanent residences.